Lawmakers tell supercommittee to cap contractor salaries

Lawmakers have asked a deficit reduction panel to lower the cap on the amount agencies pay contractors for executive salaries and to extend salary caps to all contractor employees.

Sens. Barbara Boxer (D-Calif.), Chuck Grassley (R-Iowa) and Rep. Paul Tonko (D-N.Y.) said, in a letter to the Joint Select Committee on Deficit Reduction, capping salary reimbursement for contractors’ top five executives would save at least $3 billion over 10 years.

“We do not believe that taxpayers should fund government reimbursements for private contractor salaries that are more than three times higher than the pay earned by Cabinet Secretaries,” the lawmakers wrote.

The group also is urging the super committee to extend the salary cap to all contractor employees, not just the top five executives.

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Existing law limits the amount contractors can charge for executives’ salaries to about $694,000 per employee. The lawmakers did not say what the new cap should be, but they called President Obama’s idea of limiting reimbursements to $200,000 a “good start.”

The administration also recently issued a proposed rule to collect data on salaries and benefits paid to contractors. The Labor Department’s proposal stated the data collected through a new tool may be used to identify contractors who require reviews of their compensation practices and/or full compliance reviews. Labor estimates government contractor employees account for about 22 percent of the total workforce.

“Federal employees have had their own salaries frozen for two years to help reduce the deficit, yet nothing is being done to trim out-of-control contractor spending,” said John Gage, national president of the American Federation of Government Employees, in a release. “Taxpayers should not be on the hook for these outrageous salaries that no one in government earns – not federal employees, not members of Congress and not even the President of the United States.”

Industry groups have opposed the idea of reducing salary reimbursements. TechAmerica called the plan arbitrary.

“Anything that’s not allowable for an executive is coming out of [the companies’] profits and loss centers,” said Trey Hodgkins, TechAmerica senior vice president for National Security and Procurement Policy, in an interview with Federal News Radio. “The ramifications and the implications in a very large business, or a very large business unit or large integrator, could be very different from what it would be in a mid-size or small company.”

The Professional Services Council also objected to the proposal, saying it was “shortsighted and detrimental” to agencies’ ability to meet missions.

“The recommendation from Sens. Boxer and Grassley, and Rep. Tonko, to extend contractor compensation caps to all employees is misguided. It reflects a lack of awareness of both the purpose of the current compensation caps as well as the implications of changing the basis on which they are determined,” said Stan Soloway, president of the Professional Services Council, in a statement. “The executive compensation caps are just that—caps on reimbursement. They represent the maximum that can be charged to the government but the actual amount an individual company can charge to the government is tied directly to what the government determines is fair and reasonable for a company of a similar size in a similar market.”

Hodgkins also said lowering the cap without careful consideration could affect contractors’ ability to recruit and retain top talent to work on government contracts. He did, however, express a willingness to revisit the formulas used to devise the salary caps. The committee will make its recommendations for addressing the nation’s debt and deficit by Nov. 23.